Casino slump a loser for Connecticut's budget

Updated 12:04 am, Saturday, November 17, 2012

Associated Press

HARTFORD -- A financial slump at two tribal-run casinos is contributing to budget woes for Connecticut, which has seen its annual share of gambling revenue drop in recent years by more than $100 million.

Under compacts signed with the tribes, the state receives a quarter of the slot-machine revenue from the Foxwoods Resort Casino and Mohegan Sun. The money, which goes into the state's general fund, topped out at $430 million in 2007 before a steady decline brought on by the economic downturn and new competition.

The state's comptroller and budget director have cited weak casino revenue as a factor in gloomy budget projections for the state, which is facing a $365 million shortfall for the current fiscal year. While the budget woes revealed this week have more to do with slumping tax revenue and growing Medicaid costs, Gov. Dannel P. Malloy said the loss of gambling revenue carries some of the blame.

"We're very concerned," Malloy said in an interview with The Associated Press. "Obviously, they're facing competition that they previously did not face. There's probably a finite amount of gaming revenue and the further it gets spread, the less their share is."

The Mashantucket Pequot Tribal Nation and the Mohegan Tribe, which run two of the country's largest casinos on sovereign tribal land in southeastern Connecticut, share the revenue under agreements that allow them to operate in a state that did not have casino gambling before Foxwoods opened in 1992. The state's share comes only from slot machines -- not table games or hotels or retail sales.

Joe Weinert, vice president of the New Jersey-based Spectrum Gaming Group research firm, said Connecticut is going through the same thing as several other states as a casino gambling rush nationwide introduces new competition.

"It's difficult for states because they become dependent on these considerable cash flows," he said. "Expectations have to be reset in many states."

The casino money once accounted for 3 percent of Connecticut's total revenue, but that has fallen to about 1.6 percent, according to Comptroller Kevin Lembo.

Lembo said the casinos have perhaps a bigger impact as economic engines, with employment totaling near 20,000 people and a combined payroll of $700 million. For people who live in southeastern Connecticut, he said one bright side is that casino employment has remained relatively stable despite recent layoffs affecting 300 people at Mohegan Sun.

But the state is not expecting a turnaround in gambling revenue anytime soon: A projection released Thursday by the Office of Policy and Management has the state's share continuing to fall through 2015, when it expects to receive about $307 million in slot-machine revenue.

For October, the two casinos both reported double-digit declines in slot revenue compared to October 2011, a plunge they attributed largely to Superstorm Sandy.

The Connecticut casinos have been hurt by new competition from the "racino" at Aqueduct Racetrack in New York City, and they are bracing also for the impact of table games becoming available at Twin River in Rhode Island and three casinos planned in Massachusetts.

The state budget director, Benjamin Barnes, said at an appropriations committee hearing this week that the state has been trying to help the casinos by increasing their free play allowance to boost promotions and renegotiating agreements that require the tribes to reimburse the state for regulatory and public safety services.

"So we are certainly doing everything that we can to ensure the prosperity and success of the casinos, but it's a tough time to be in the casino business," Barnes said.